Consolidation a sign of the times in global adhesive industry

German-based chemical and cosmetic group Henkel, already the world's leading producer of adhesives, recently extended its grip on this US$21-23 billion industry with its US$400 million purchase of Dexter's Specialty Polymers business through its U.S. subsidiary Loctite.

This deal, according to World Adhesives File 2000-2005, a recent report published on the global adhesive industry by London-based Market Tracking International (MTI), will increase Henkel's market share of the world adhesive industry from 12% to 14%. A combined Loctite (Henkel)/Dexter operation will now have a dominant position in the fast-growing electronic adhesive market, which is currently experiencing double-digit growth.

This transaction is the latest in a series of deals that has seen the global adhesive industry consolidate with increasing speed over the past 18 months.

Other major deals include TotalFina's US$500 million Bostik adhesive business merging with Elf's US$600 million Ato Findley unit to form Atofina. Also, a recent chemical merger that has directly impacted the adhesive industry is the alliance between Rohm and Haas and Morton International. This deal has combined Rohm and Haas's US$200 million acrylic adhesive business with Morton's bigger adhesive operations worth more than twice this amount.

Packaging margins fading
World Adhesives File 2000-2005 reports that further deals of this kind are very likely to occur in the future, as the global adhesive industry, which has been ripe for consolidation for many years, is now set for a period of stepped-up consolidation. Major adhesive companies are now increasingly targeting specific fast-growing market segments and chemistries, typically the haven for smaller suppliers, as margins and growth rates in the traditional large end-user markets for adhesives, namely packaging and construction, slowly disappear.

In particular, opportunities across the specialized adhesive markets, such as electronics, medical and some areas of the automotive industry, are in high demand. Growth in these markets is being driven by strong end-user demand and new product developments where adhesive compounds are increasingly being used as direct replacements for mechanical fasteners.

High growth in p-s label market
Another area currently experiencing high growth is the pressure-sensitive adhesive label market, where the explosive growth in retail shopping over the Internet has led to greater use of such pressure-sensitive items as labels and bar codes.

According to World Adhesive File 2000-2005, the leading handful of adhesive suppliers, including pressure-sensitive companies, already controlled almost half the global market in 1999 (see pie chart). Henkel leads the way with an estimated 12% global market share, which will probably increase to around 14% with the purchase of Dexter's adhesive interests. Pressure-sensitive suppliers 3M and Avery Dennison are ranked second and third, with 9% and 7% shares respectively, followed jointly by National Starch and HB Fuller, both with 6%. The newly enlarged Atofina and Rohm and Haas follow closely behind.

Estimated World Market Shares of Leading Adhesive Manufacturers 1999

World Adhesives File 2000-2005 is available at a cost of £1,200 (US$1,681) from Market Tracking International Ltd.

For more information or to order the report: Market Tracking International Ltd., 6 Archway Business Centre, Wedmore Street, London N19 4RU, UK, Tel: +44 (0)20 7263 1365, Fax: +44 (0)20 7272 8525

Edited by Bill Noone